After I obtain a abstract of a hashish enterprise deal–the primary emails, calls, LOIs, and time period sheet in any type–with 90% accuracy I can say whether or not the transaction can be a troublesome one or not. Be aware that “troublesome” doesn’t correlate with complicated: Usually the extra complicated offers, with a number of entities and asset transfers, find yourself being a lot simpler, whereas a easy secured mortgage may be harder. And within the context of a transaction, “troublesome” = “time consuming” = pointless expense. Everybody wish to keep away from that.
The primary differentiating and determinative consider assessing the issue of a marijuana enterprise deal is the time period sheet. If a deal is a constructing, consider the time period sheet as each the architect’s blueprint and the bodily basis on which the deal is constructed. Offers which can be clean are constructed with a transparent plan and on a stable base; these are available on time and beneath price range. Offers which can be constructed primarily based on a obscure understanding of the ultimate purpose however with no agency, documented plan, can be typified by stops and begins, partitions constructed, torn down and rebuilt, and a last product that stands however doesn’t resemble what both events had in thoughts (“in thoughts” being a key phrase right here, as usually what was within the events’ thoughts was by no means exchanged in an settlement). Oh, and the dreaded price overruns.
Interact your legal professional earlier than you signal a time period sheet.
Having a last time period sheet is critical for a clean transaction, however agreeing half-baked time period sheet is “last” could show worse than having no time period sheet in any respect. Don’t make the error of pondering you can’t interact your legal professional till you will have a time period sheet signed: In truth, an hour together with your legal professional earlier than you finalize the phrases, might prevent many hours down the road. Your skilled enterprise legal professional will understand how the phrases will match within the paperwork, and in flip what phrases you could not have addressed totally, or in any respect.
Wouldn’t have your legal professional draft the transaction paperwork till after you signal a complete and binding time period sheet.
Velocity in transactions is outlined by certainty. Time period sheets that say “market normal” phrases for X is probably going a proxy for “we didn’t take the time to debate X.” This could work if the events have a standard reference level or an exterior reference. For instance, within the context of an fairness financing, “normal NVCA language on Registration Rights” is OK. “Customary anti-dilution” will not be OK: There are at the very least three flavors and they’re wildly totally different, so the drafting legal professional with that time period sheet is guessing–or probably speaking solely to his facet–on the problem. The stops, begins, and re-drafts is what eats up time.
Persevering with with the constructing analogy: Each couple constructing their dream house needs the home constructed shortly and accurately, and on price range. However they’d higher get all of the essential particulars determined and within the plans earlier than the primary brick is laid. In different phrases, in the event you don’t agree on the placement and variety of loos, you wouldn’t inform a contractor to “begin constructing now and we’ll determine on the loos later.” The choices received’t get simpler in the event you put them off, and having a full plan in place from the start will make the method extra pleasing for all.